Mortgage Fraud Reports Reach Record

In the first fiscal quarter of this year financial institutions filed a record 15,000 suspicious activity reports with the Federal Bureau of Investigation, passing on allegations of mortgage fraud and other criminal behavior.

If the pace keeps up, more than 60,000 SARs will be filed this year, outstripping 2007 when 46,717 reports hit the system.

In a media briefing here last month, FBI officials said the agency has 14 major "corporate fraud" investigations underway involving mortgage or related companies.

The focus, officials said, was on subprime firms, their accounting, lending practices and insider trading.

The agency did not specify any cases but it's well known that the collapse of subprime giant New Century Financial Corp. of Irvine, Calif., is the subject of a major probe. Investigators are reviewing allegations of accounting fraud and insider trading at the now-defunct New Century, once the nation's largest subprime wholesaler.

Sources told this newspaper that some New Century account executives instructed their loan brokers to make up business cards to help document borrowers who were self-employed and were applying for stated-income loans.

As already reported, the Securities and Exchange Commission is investigating the failure of several subprime firms, focusing on - among other things - their investment bankers, including Bear Stearns, Merrill Lynch and Morgan Stanley.

The FBI is assisting in that probe as well. The agency currently has 34 mortgage fraud task forces set up throughout the U.S.

Agents are investigating everything from broker and LO fraud in the primary market to accounting fraud in the secondary.
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